China’s Rivers of Cash Flowing Wrong Way

“Maybe they should declare a moratorium on production for a year and pay peasants to walk around for a year, exercise, without adding to supply,” he says.

But the politics seem to demand that the state spends an ever-increasing share on what China least needs. ”It’s all absolutely the same: building absolutely wasteful buildings, more opera houses, more Terminal 3’s [Beijing’s new airport] and CCTV towers. These buildings would never have been built in the ’80s, not because China was poor but because the government was poor. Now the view is that ‘anything we do increases GDP, so what’s the problem’?”

The worsening of China’s already sizeable problems of inequality, corruption and economic imbalances over the years has caused Huang to question whether the political system is capable of welfare-enhancing economic reform. Like many China watchers, he is coming to the view that the answer might be no.

So why does the self-interest of China’s bureaucracy and state-controlled monopolies appear to trump all else?